Riot Games Gets $8M to Target Hardcore Gamers

Riot Games has raised $8 million from Tencent and returning investors Benchmark and FirstMark Capital, said the Culver City, Calif.-based publisher, which develops free-to-play, digitally distributed games with a microtransaction/virtual goods revenue stream. Such a model has worked extremely well in Asia, and is showing promise in the West, but mainly for web-based social/casual games and virtual worlds for kids. With this funding, however, Riot plans to target hardcore gamers, starting with the launch of League of Legends, a downloadable strategy/role-playing game from the creators of the extremely popular Defense of the Ancients.

The goal, Riot Games CEO Brandon Beck told me, is to provide a rich gaming experience that’s competitive with major publisher franchises like Call of Duty and World of Warcraft — but unlike those retail-distributed, high-cost titles, offer it online for free. As Beck explained, “The video game industry is undergoing a dramatic transition from a packaged goods offering to a service industry.” His company is backed by experienced investors with a pretty good track record in gaming: BenchMark also put early money behind Habbo, Gaia Online and Second Life, while China’s Tencent is the big gorilla of virtual goods, earning $1 billion in revenue last year.

Have been looking at “Blizzard-killers” for a long time and looks like Aion will fail as well (it’s like an emo version of Diablo 2). It will be interesting to see how it plays out for League of Legends since most US/EU hardcore gamers would not touch transaction-based games with a 10-foot pole. But few of those had tier 1 VC backing and a stellar team that had DotA under their belt (for the uninitiated DotA started as a custom map for a real time strategy game and became a *hugely* popular game in itself between hardcore gamers). Personally I’m quite excited at the news.

As a side note Habbo and Second Life are nothing more than glorified IRC and they do cater to completely different audiences.